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Central Bank Urges Collaboration Between Banks and Borrowers to Revive Viable Businesses

In response to the challenging macroeconomic conditions facing Sri Lanka, the Central Bank has instructed licensed banks to reinforce existing revival units, aiming to mitigate business collapses.

The directive mandates licensed banks to establish Business Revival Units (BRUs) by mid-May 2024, with full compliance expected by July 1, 2024. On March 28, the Central Bank issued comprehensive guidelines to enhance the functions of post-COVID-19 revival units, transforming them into BRUs.

The Central Bank emphasizes effective collaboration between licensed banks and borrowers to ensure the sustainable revival of viable businesses, fostering economic activity and national development. This decision, made in consultation with relevant stakeholders such as the banking industry and Chamber of Commerce, acknowledges the disruptive impact of recent macroeconomic conditions on business income and loan repayment capabilities.

BRUs are deemed essential to assist both performing and non-performing borrowers whose businesses hold fundamental viability. Key features of BRUs, outlined in the circular, include robust revival policies, viability assessments encompassing financial and non-financial indicators, and borrower cooperation throughout the revival process.

Moreover, BRUs are empowered to utilize financial and operational restructuring tools, with selection guided by mutual agreement between involved parties. Corporate borrowers, defined as businesses with an annual turnover exceeding Rs.1 billion or cumulative outstanding credit facilities exceeding Rs.250 million, are encouraged to adopt a voluntary ‘Corporate Workout Framework’ to address financial distress.

Through these measures, the Central Bank aims to foster a conducive environment for the sustainable revival of businesses, mitigating the impact of adverse economic conditions and safeguarding the stability of the financial sector.

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